It would appear that an Xbox spokesperson is attempting damage control even as up to over 1,000 staff could be facing layoffs. Over the last few days, announcements and rumors regarding studio closures have circulated among Xbox’s gaming partners, thus producing a growing dark cloud over Microsoft’s gaming division. Xbox is beginning to resemble 90s-era FOX television in the sense that no matter how much praise you get from peers or fans, no one is safe from losing their job.
Speaking to Bloomberg (via VGC), Microsoft has said, “We’re not reducing our overall investment in games. We expect to invest about the same in content as we did last year. What’s changing is where we’re investing and the kinds of projects we’re backing.”
This statement probably holds little comfort for those who’ve already been told they are no longer employed. It was just yesterday that The Verge reported on Dishonored series developer Arkane Studios’ closure. Arkane had been working on a game based on Marvel’s day-walking vampire hunter, Blade, but that is now officially dead on the table. Meanwhile, IO Interactive has said it has ended its partnership with an undisclosed partner believed to be Microsoft regarding a title called Project Fantasy, which had originally been announced as an Xbox exclusive in 2023. The Hitman/007 developer has said it will attempt to develop Project Fantasy but is now seeking other funding resources to publish it.
Other studios that could be on the chopping block include Ninja Theory, Compulsion Games, Double Fine, and more. Despite this, Xbox is claiming it is still committed to investing in games, but at some point, one wonders in what form or fashion that will be when only a small handful of studios remain partnered with it. Unionized Xbox staff are making their voices heard (via Kotaku), stating they “We’re done paying for executive failures,” and will not be treated as disposable even as internal layoffs are expected in the coming days and weeks. Among all this chaos, it has been discovered that the head of Xbox Games Studios, Craig Duncan, has resigned.
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Microsoft is planning to announce job cuts soon as the tech giant continues efforts to control costs, according to people familiar with the situation.
The cuts are expected to impact thousands of roles, including sales and consulting, in addition to jobs at the Xbox gaming division, the people said.
This round is expected to be smaller than similar layoffs last year. This time, the cuts are projected to be less than 2.5% of the company's 220,000-person workforce, the people added. They asked not to be identified discussing sensitive matters.
The company is planning to announce the layoffs next week, although the exact timing could change. Some affected employees will be offered new roles immediately, one of the people said.
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Is Xbox freezing third-party Xbox Game Pass deals? Here's what's being said, and why I don't buy it.
News
By Jez Corden last updated 2 days ago
A new report suggested that Microsoft is freezing money for new third-party Xbox Game Pass deals. I don't buy it.
latest Xbox Game Pass rumor, suggests Microsoft is no longer planning to new third-party funding for new Game Pass titles (via Insider Gaming).
During an episode of The Business of Gaming PodcastFernando Rizo of Caboodle Games shared rumors that Microsoft "rug pulled" Game Pass deals from industry colleagues Rizo had spoken with recently.
but at least one industry publishing figure Stephen DuCrest poured cold water on the rumors earlier, saying it wasn't "remotely true."
UPDATE (8:45PM CEST, June 29, 2026): No update from Microsoft, but a trusted source suggested to me that my analysis is correct. There are no blanket plans to end funding for third-party games on Game Pass. Any recent run of frozen discussions revolves around Microsoft's fiscal year ending and Xbox's "reset" plan.
[URL unfurl="true"]https://www.windowscentral.com/gaming/xbox/is-xbox-freezing-third-party-xbox-game-pass-deals-heres-whats-being-said-and-why-i-dont-buy-it[/URL]
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Xbox is reportedly considering closing State of Decay developer Undead Labs
Survival horror.
Undead Labs, the team behind the State of Decay series, was revealed to be among the Microsoft-owned studios under threat of closure. Undead Labs is currently working on survival shooter and management sim State of Decay 3, and the game was part of the Xbox Showcase earlier this month.
The information comes from GamesBeat, which names the studio alongside Double Fine, Compulsion, and Ninja Theory as all being studios that Microsoft could close. While we've known about the other three, this is the first time Undead Labs has been revealed to be at risk of closure as Microsoft seeks to 'reset' the Xbox brand.
[URL unfurl="true"]https://www.eurogamer.net/undead-labs-xbox-potential-closure-state-of-decay-3[/URL]
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007 First Light studio IOI facing layoffs as Xbox pulls funding for Project Fantasy RPG
"What's changing is where we're investing."
Xbox has pulled out of a deal to fund and publish the online fantasy RPG - Project Fantasy - that's in development at Hitman and 007 First Light developer IO Interactive.
IOI released a statement yesterday evening announcing that "a relationship with an external partner on our own IP, Project Fantasy, has come to an end". This will result in short-term consequences around "staffing decisions", the statement added, which we can infer to mean layoffs.
In a report published at the same time, Bloomberg revealed the external partner to be Microsoft's Xbox division.
[URL unfurl="true"]https://www.eurogamer.net/007-first-light-io-interactive-hitman-layoffs-project-fantasy[/URL]
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Dishonored developer Arkane is reportedly one of five studios Microsoft is targeting to close down as part of its big 'reset'
That don't Empress me much.
Arkane Studios, the developer behind the Dishonored series and the upcoming Blade, is among the studios Microsoft is currently considering closing down. That's according to a new report from The Verge, citing sources familiar with the plan.
If true, Arkane would be the fifth Microsoft-owned studio to be in a similar position. It's been previously reported that Compulsion Games, Ninja Theory, Double Fine, and Undead Labs are all in talks with the company to determine their fate. As a result, Arkane's upcoming Blade action game may be cancelled.
[URL unfurl="true"]https://www.eurogamer.net/arkane-may-be-shuttered-blade-cancelled-xbox-layoffs[/URL]
more:
Xbox reportedly stops signing third-party Game Pass deals
UPDATE: "I had spoken to a number of devs that had deals in various stages of negotiation."
"I don't personally think this is the death of Game Pass or anything, probably just a new CEO wanting to get her feet under her desk and everyone aligned on strategy before the Game Pass team starts cutting cheques again."
[URL unfurl="true"]https://www.eurogamer.net/microsoft-xbox-game-pass-deals[/URL]
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Amid reports Xbox is preparing for significant layoffs, a wave of staff at South of Midnight developer Compulsion Games announce their departure
Is Asha Sharma's 'reset' already underway?
At least a dozen people have departed award-winning South of Midnight developer Compulsion Games this week, following reports that Xbox is planning major restructuring that could result in "significant" layoffs and studio closures.
LinkedIn posts by a dozen former Compulsion staff, shared during the past week, highlight a string of departures, with at least one former employee "unexpectedly" finding themselves without a job and now looking for work.
Compulsion is the Canadian studio responsible for We Happy Few and more recently, the incredibly stylish and musical Southern American folklore adventure, South of Midnight, which won a Peabody award as well as a BAFTA for best new intellectual property. Microsoft bought Compulsion Games as part of a huge spending spree in 2018, shortly before We Happy Few was released.
[URL unfurl="true"]https://www.eurogamer.net/xbox-layoffs-compulsion-games-south-of-midnight[/URL]
It'll be interesting to see how long Asharma and Matt will last. Nothing against either but all this does not bode well for anyone there and I doubt some magic AI wand is going to save the day.
it is kind of like Elop & Windowsphone / Nokia — the last stand basically. how long before Microsoft does Microsoft things & scraps one more (low margin) consumer hardware initiative 🤔🤔
Yeah, not reducing overall investment = Fire workers and art directors but increase Hollywood Pork spending in what will be fewer releases.
does this mean a tie-up between XBOX & Epic Games (unreal engine) in the long run ??
Jinkies!